Best Buy 2000 Annual Report Download - page 24

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Consumer electronics comprised 28% of the Company’s total sales mix in fiscal 2000, up from 27% in
fiscal 1999. Growth in the sales of digital products, such as DVD players, digital camcorders and digital
broadcast satellite receivers, contributed to this increase. Consumer demand for DVD players, driven by
prices under $200 by year-end, and the expanded availability of popular DVD movie titles, resulted in DVD
hardware comparable store sales increases of more than 150%. Despite consumers’ rapid acceptance of the
DVD format, just over 5% of national households own a DVD player, indicating a significant opportunity
for the Company to capitalize on further market penetration. Also contributing to the sales mix increase
were strong sales of traditional analog products, such as televisions and home theater components, resulting
from better in-stock positions, more effective advertising and increased affordability. The introduction
of digital television also continued in fiscal 2000. While unit sales have been modest and prices remain
relatively high for both digital-ready and high-definition TV, there is growing consumer interest in this new
technology. The Company expects that selling prices will begin to moderate and digital programming will
increase, generating additional demand for digital television. The Company believes digital television
also represents a significant revenue opportunity in the coming year.
Sales of entertainment software, which includes recorded music and movies, computer software and video
games, benefited from strong sales of compact disc (CD) and DVD titles. Sales of recorded music were driven
by a higher demand for new releases and better in-stock levels of high-demand titles. The Company posted
a second consecutive year of DVD movie comparable store sales gains of more than 100% due to consumers’
rapid acceptance of the DVD format, a broader assortment of movie titles and improved retail execution.
The Company’s combined unit sales of CDs, DVDs and VHS movies exceeded 100 million units in fiscal
2000 for the first time ever. Computer software sales were impacted by a lack of new releases and declines
in average selling prices. Video game sales were impacted by declines in average selling prices and product
shortages; however, the launch of new technology could invigorate this category in the coming year.
The appliances product category was 8% of total sales in fiscal 2000, unchanged from fiscal 1999. Comparable
store sales increases of appliances were better than the industry as a whole, driven by more effective
promotions, improved in-stock levels and a broader assortment of products. However, there were fewer
technological advancements in appliances compared with other product categories, resulting in a more
moderate comparable store sales increase than the Company as a whole.
The “other” category, comprised of photographic products, furniture and PSPs, increased to 10% of sales in
fiscal 2000 from 9% of sales in fiscal 1999. Increased popularity of digital cameras contributed to sales
increases in this category, while generally higher unit sales of products led to increased sales of PSPs. Better
merchandising of home office supplies also contributed to the overall sales gains in this category.
Management’s Discussion and Analysis of Results of Operations and Financial Condition